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My general understanding of recourse vs non-recourse debt is the same as Prophet43M.

It is my understanding that in the case of bankruptcy, unsecured bond holders have recourse against the debt issuer (could be a corporation or a subsidiary). So I think of unsecured debt as "recourse" debt.

But, as is usually the case, it’s not quite so simple. I learned this from my Amerenenergy bonds.

My Amerenenergy Genco bonds were also trading on the verge of bankruptcy until Dynegy (DYN) bought Genco from Ameren (AEE) and promised to continue paying interest on the bonds because they said: “the Genco unit came with non-recourse debt”. I guess what they really meant is Genco debt was non-recourse to it’s parent (see S&P quote below).

So it seems that recourse and non-recourse is also dependent on how the parent/subsidiary structure is setup and who issued the bonds. It comes down to recourse against whom! This is what I was wondering about, in the case of Edison Mission Energy bonds.


This is what S&P said about the Ameren/Genco capital structure:

Capital structure

GenCo has a stand-alone debt structure that is nonrecourse to its parent company or any of its parent company's other subsidiaries. GenCo's debt consists of three series of senior unsecured notes totaling $825 million.

We further note that the Ameren Corp. and its various other operating subsidiaries also have their own debt obligations that are nonrecourse to GenCo.
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